Article Written by Rhiannon M. Hartman, Esq.
Hardly a day goes by without the news of another celebrity passing away – Aretha Franklin, Kate Spade and Anthony Bourdain most recently and notably. Upon each famous death, there is often an outpouring of (among other things) disbelief at how their affairs were not settled properly prior to death. Celebrities – they’re just like us in one important respect – the tendency to ignore critically important estate planning tasks until it’s too late. The following are several common estate planning mistakes, as illustrated by the estates of the rich and famous:
- Having No Estate Plan
Unexpected deaths are unfortunately familiar to all of us, and celebrity deaths are no exception. The mistaken belief that there will be time to plan later is common. Unfortunately, there are no second chances in estate planning. Having a plan in place, that can always be adjusted later if your circumstances change, is far better than having no plan at all.
The public recently learned that Aretha Franklin, despite her multimillion dollar estate, passed away with no will or trust. Her longtime attorney lamented the fact that despite his strong recommendation, she “never got around to” establishing a trust. He also pointed out that unfortunately, “any time they don’t leave a trust or will, there always ends up being a fight.” As of now, a niece has asked to be appointed administrator of the estate, and each of her four sons have filed as interested parties. Additionally, Franklin has a history of conflicts with creditors, which could complicate the administration of her estate. While the exact details of the distribution of Franklin’s estate remain to be determined, there are many complications that could have been easily avoided through her execution of a comprehensive estate plan.
Another recent example of this mistake is the musician Prince, who at age 57 had no estate plan at all when he died. Unfortunately, this has led to litigation over his estimated $300 million estate among his siblings and other individuals exerting claims to an inheritance from his estate. Although the vast majority of individuals do not have an estate as large and complex as Prince’s, they still share the common goal of wanting to ensure their estates pass to intended beneficiaries, in the time and manner desired. To ensure that your estate is distributed as you want, and not subject to costly litigation, conflict, and distribution to unintended individuals, an estate plan is critically important.
- Not Updating your Estate Plan
It is essential to have an estate plan. However, it is just as important to keep the plan up to date in light of legal, financial and family changes, to continue to ensure that your estate will be distributed in the intended manner. Unfortunately, it is not uncommon that individuals with established estate plans fail to update or amend their documents in the event of marriage, remarriage, divorce, or birth of children.
When Whitney Houston passed away, her estate plan was almost twenty years old. The Will had been drawn up prior to the birth of her only child, Bobbi Kristina, and at a time when she had a more modest estate. By the time of Whitney Houston’s death, her Will’s terms required her daughter to inherit ten percent of the estate at age 21, outright. When the Will was written, the ten percent distribution may have seemed somewhat reasonable. However, the estate had grown significantly, and Whitney Houston’s sudden death resulted in Bobbi Kristina inheriting a substantial estate without any controls on its use or distribution. As evidenced by the tragedy, publicity and controversy surrounding Bobbi Kristina’s short life, there is some indication that she was financially exploited and surrounded by unscrupulous people. An update to Whitney Houston’s estate plan that would have allowed protection for the significant wealth and for her vulnerable daughter, would have been preferable to such a young person inheriting assets outright.
The birth of a child is a milestone event that merits a reexamination of an existing estate plan. Other changes in life situation, such as divorce or separation, also necessitate a change to estate planning documents.
While the deaths of Kate Spade and Anthony Bourdain are too recent to know the details of their respective estates, both situations were similar in that they were each separated from their spouses at time of death. In the event of a major change in life situation such as a separation or divorce, it is critically important to update essential documents such as Powers of Attorney and Advanced Medical Directives, to ensure that an estranged or ex-spouse cannot make critical decisions in the event of incapacity. It is also imperative to seek the advice of an experienced estate planning attorney to determine needed changes to the estate plan and beneficiary designations, to ensure that assets do not pass unintended to a surviving prior spouse.
- Failing to Fund a Revocable Living Trust
A trust is an excellent tool to avoid probate and ensure the privacy of estate matters. However, a trust on its own is insufficient to ensure these important estate planning goals are fulfilled. The protections and ease of administration that a trust can provide only apply if the trust is properly funded. In other words, assets must be titled to the trust and beneficiary designations must be structured properly during the Trustmaker’s life, to avoid the assets passing through the probate system into the trust after death.
Unfortunately, although Michael Jackson had a Revocable Living Trust, he did not completely fund it with his estimated $600 million estate.  As probate is a public process, this has meant that many of his financial assets and estate planning goals have been made public and subject to challenge by many family members. To ensure the privacy of estate matters, as well as to ensure simplicity of administration of your estate, the creation and funding of a Revocable Living Trust is critically important.
Just as important as revisiting an existing plan, trust funding matters should also be reviewed on a regular basis. It is not unusual for people’s assets to change over time, so revisiting the funding of your Trust with your estate planning attorney on a regular basis is essential to ensure that the estate is administered as efficiently as possible.
The Important Lesson
The key takeaway from these famous estate planning missteps is that it is critically important to create, and consistently update, a comprehensive estate plan. The first step is to meet with your estate planning attorney to develop a plan that allows for management of your decisions to be made by trusted individuals in the event of your incapacity, and ensure an efficient distribution of your estate to your intended beneficiaries at time of death. The next step is to continue to update your estate plan as your family and financial situation changes. “Milestone” events such as the birth of a child, marriage, divorce, retirement, or death of a family member almost always merit a review of the plan, to determine whether any changes or needed. However, a regular review every few years is also recommended to ensure your estate plan is current in light of any changes to state or federal law, and that critically important follow-up matters like funding your Revocable Living Trust have been completed.
 https://www.aarp.org/money/taxes/info-2016/celebrity-estate-mistakes-photo.html#slide2; https://www.townandcountrymag.com/society/news/g2280/celebrities-who-died-without-a-will/
 https://www.aarp.org/money/taxes/info-2016/celebrity-estate-mistakes-photo.html#slide3; https://blog.pennmutual.com/celebrity-estate-planning-mistakes/